Maintaining a cash reserve is important for several reasons:
- Risk Management: A cash reserve can help mitigate risks by providing funds to deal with emergencies such as sudden drops in revenue, unexpected expenses, or economic downturns. - Operational Stability: It ensures that the business can continue operating smoothly without interruptions, even when cash flow is temporarily affected. - Investment Opportunities: Having a cash reserve allows entrepreneurs to seize sudden investment opportunities without disrupting the normal cash flow of the business. - Creditworthiness: A healthy cash reserve can enhance the business's creditworthiness, making it easier to secure loans and attract investors.